TOKYO--While arguing his case that he can upend the U.S.
wireless industry as he has done successfully in Japan, SoftBank
Corp. (9984.TO) Chief Executive Masayoshi Son lists off the
parallels between the two markets -- high revenue per user,
scarcity of pre-paid users, and consumer thirst for
smartphones.
But the difference in network speeds on either side of the
Pacific Ocean -- Japanese smartphone connection speeds are 30% to
40% faster than in the U.S. -- presents the fiercely ambitious
Japanese billionaire with what he says is an opportunity that he
can capitalize on to turn around Sprint Nextel Corp. (S), the
number-three U.S. carrier.
"Right now, every time I come to the States, I say "Wow! this is
so slow, what is this? It's unbearable,'" he said in October when
he announced SoftBank's initial agreement with Sprint, pledging to
speed up Sprint's network speeds.
After weeks of suspense due to a rival bid from cable network
operator Dish Network Corp. (DISH), Sprint shareholders are
expected to approve SoftBank's $21.6 billion deal to acquire 78% of
the U.S. wireless carrier. The vote, along with expected approval
from the U.S. Federal Communications Commission, clears the way for
the deal to close in early July, pitting the Internet billionaire
against AT&T Inc. (T) and Verizon Wireless, the two titans of
the U.S. wireless industry.
Armed with Sprint's access to Clearwire's rich spectrum holdings
-- rights to use swaths of airwaves to transmit phone calls,
Internet traffic and other data -- Mr. Son said he plans to
replicate his success in Japan in building a network supporting
what he says is the world's fastest and smoothest smartphone
connectivity.
"We created a network that can withstand the traffic to be
expected in the age of smartphones without "packet freezes" and
data disruptions. SoftBank's network is superior in terms of both
speed and quality," Mr. Son said on Friday at SoftBank's
shareholder meeting when he laid out just about grand his ambitions
are: to be the No. 1 company in the world by sales, profit, and
market capitalization "at any cost."
Sprint's turnaround won't be easy. Developing networks in the
U.S. is difficult, where huge areas need to be covered and upgraded
unlike the more densely populated Japan. According to data from
Cisco Visual Networking Index, the average smartphone connection
speed in Japan was 2.1 megabytes per second in 2012 -- nearly 40%
faster than the average 1.5 megabytes per second in the U.S.
While Mr. Son said Sprint is already showing signs of
turnaround, the U.S. carrier narrowed its losses in the first
quarter partly because it gained fewer customers, meaning lower
upfront costs to cover subsidies for new handsets. Its postpaid net
additions totaled 12,000 subscribers in January-March, with its
total end of period subscribers standing at 55.2 million
subscribers at the end of March, down from 56.1 million from a year
ago.
SoftBank's acquisition would inject $5 billion directly into
Sprint to develop its high-speed network. The money also could help
Sprint continue to offer new flat-rate, unlimited data plan, seen
as key for it to compete against AT&T and Verizon Wireless,
both of which have restrictions on their most recent smartphone
data plans. Sprint will also need such a plan to stay ahead of No.
4 U.S. carrier T-Mobile, which offers unlimited data plans.
SoftBank and Sprint together have 97 million users, and that
scale would help Sprint win more than $2 billion of cost cuts every
year from handset and network equipment makers, which could mean a
more economical expansion of Sprint's network, Mr. Son said.
In a May interview, Mr. Son said that the U.S. market is overdue
for disruption. Verizon and AT&T together hold two-thirds of
the U.S. market and customers and have felt no need to aggressively
compete in pricing or services, he said. "There are all kinds of
ways to excite the people with segmentation, with packaging or new
campaigns or introduction of new innovative service or innovative
products."
When SoftBank bet the house to acquire the loss-making Japanese
arm of U.K.-based Vodafone Group PLC (VOD) for Y1.75 trillion in
2006, it took a no-holds-barred approach to make waves in a market
80% controlled by the top two players: NTT DoCoMo Inc. (9437.TO)
and KDDI Corp. (9433.TO). To win customers, SoftBank slashed
monthly payment charges to about one-quarter of the competition's.
Eventually, rivals caved and matched SoftBank's low-cost pricing.
He also unveiled an aggressive marketing blitz that trumpeted the
savings that SoftBank can offer consumers.
"I would expect Mr. Son to advertise greater value for money --
bigger bang for buck and more data speeds for a lower price than
Verizon and AT&T," said Richard Guppy, head of mobile strategy
at consultancy Strategy Analytics. "But I don't think he needs to
repeat the kind of scorched earth tactics it took in Japan.
Sprint's pricing plans are already low."
SoftBank's mobile-phone business, a distant No. 3 when Mr. Son
bought Vodafone Japan, has now led its two bigger rivals in winning
new net subscribers -- or new users minus cancellations -- for 17
straight months and it won more than half of net new users in the
year ended in March. Its market share in Japan has grown from 16%
in 2006 to almost 25%, while the number of its subscribers has
doubled.
Part of the gain in subscribers has been the result of a steady
improvement in the performance of SoftBank's mobile network. After
often being derided for years as being inferior to that of its
rivals, SoftBank said its network is now on par with the
competition in terms of network speed, coverage area and connection
stability.
"You cannot dismiss him as a normal businessman who just talks
big. He is a logic and data machine," said Yusuke Tsunoda, analyst
at Tokai Toyo Research Center. "When he says he will be the world's
No. 1 firm, that's what his calculations are telling him,
period."
Write to Mayumi Negishi at mayumi.negishi@dowjones.com and
Spencer E. Ante at Spencer.Ante@wsj.com
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